China's Tencent celebrates Year of Horse with mobile gifts

BEIJING (Reuters) - More than a billion Chinese people will celebrate the Year of the Horse on Friday and for many that means giving or receiving traditional gifts of cash-filled red envelopes called "hongbao".

China's Tencent Holdings Ltd (0700.HK) is putting a twist on the practice with the launch last Sunday of a digital version of hongbao on WeChat, its smartphone messaging, mobile payment and gaming platform that has taken China by storm.

The release of the hongbao feature triggered a surge in Tencent's WeChat Payment users to 100 million from 30 million last month, according to a note written on Wednesday by Standard Chartered technology analyst Wendy Huang.

WeChat Payment user numbers could reach 200 million by the end of 2014, Huang wrote, which would see Tencent move ahead of Alibaba Group Holding Ltd IPO-ALIB.N and its Alipay online payment affiliate.

Tencent's move is an ironic twist in a bitter rivalry between the two tech companies fighting for smartphone, gaming and e-commerce dominance in China. Ironic because the idea isn't an original one.

Alibaba first tried its hand at digital hongbao using its Alipay platform in 2012. This year Alibaba's feature went live on January 23 and within a day 220,000 digital red envelopes had been sent containing more than 18 million yuan.

While Alibaba currently leads the race in online payments, WeChat's sheer scale with 272 million monthly active users as of last September gives it a strong userbase through which to launch products like WeChat Payment.

Whether Tencent can hold on to those new users and turn the Year of the Horse into the Year of the Penguin - its corporate mascot - is another matter. At least 97.6 percent of online shoppers in China hold an Alipay account, according to data from Maverick China Research.